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    UltraTech Cement Limited's (NSE:ULTRACEMCO) Stock Been Rising: Are Strong Financials Guiding The Market?

    Simply Wall St·12/29/2025 00:12:30
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    UltraTech Cement's (NSE:ULTRACEMCO) stock up by 2.6% over the past week. Given its impressive performance, we decided to study the company's key financial indicators as a company's long-term fundamentals usually dictate market outcomes. In this article, we decided to focus on UltraTech Cement's ROE.

    Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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    How Is ROE Calculated?

    Return on equity can be calculated by using the formula:

    Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

    So, based on the above formula, the ROE for UltraTech Cement is:

    9.6% = ₹73b ÷ ₹760b (Based on the trailing twelve months to September 2025).

    The 'return' is the yearly profit. That means that for every ₹1 worth of shareholders' equity, the company generated ₹0.10 in profit.

    View our latest analysis for UltraTech Cement

    Why Is ROE Important For Earnings Growth?

    So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

    UltraTech Cement's Earnings Growth And 9.6% ROE

    At first glance, UltraTech Cement's ROE doesn't look very promising. Although a closer study shows that the company's ROE is higher than the industry average of 6.7% which we definitely can't overlook. However, UltraTech Cement has seen a flattish net income growth over the past five years, which is not saying much. Bear in mind, the company does have a slightly low ROE. It is just that the industry ROE is lower. Therefore, the low to flat growth in earnings could also be the result of this.

    Next, on comparing with the industry net income growth, we found that the growth figure reported by UltraTech Cement compares quite favourably to the industry average, which shows a decline of 2.4% over the last few years.

    past-earnings-growth
    NSEI:ULTRACEMCO Past Earnings Growth December 29th 2025

    The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. If you're wondering about UltraTech Cement's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

    Is UltraTech Cement Efficiently Re-investing Its Profits?

    Despite having a moderate three-year median payout ratio of 29% (meaning the company retains71% of profits) in the last three-year period, UltraTech Cement's earnings growth was more or les flat. So there might be other factors at play here which could potentially be hampering growth. For example, the business has faced some headwinds.

    Moreover, UltraTech Cement has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth. Existing analyst estimates suggest that the company's future payout ratio is expected to drop to 23% over the next three years. Accordingly, the expected drop in the payout ratio explains the expected increase in the company's ROE to 14%, over the same period.

    Conclusion

    In total, we are pretty happy with UltraTech Cement's performance. In particular, it's great to see that the company has seen significant growth in its earnings backed by a respectable ROE and a high reinvestment rate. With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.